U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2002

                                       OR

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

From the transition period from _________ to __________

Commission File Number 001-14015

                             U.S. HOME & GARDEN INC.
             (Exact name of registrant as specified in its charter)

           Delaware                                   77-0262908
 (State or other jurisdiction                         IRS Employer
of incorporation or organization)                     (Identification Number)

655 Montgomery Street
San Francisco, California                             94111
(Address of Principal Executive Offices)              (Zip Code)

                                 (415) 616-8111
              (Registrant's Telephone Number, Including Area Code)

Indicate by check whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                              Yes |X|   No |_|

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common equity, as of the latest practicable date.

As May 3, 2002 there were 17,543,379  shares of the issuer's  common stock,  par
value $.001 per share, outstanding.


                                                                               1
<PAGE>

Part I. - Financial Information

Item 1. - Consolidated Financial Statements

Consolidated balance sheets as of March 31, 2002 (Unaudited)                 3-4
and June 30, 2001

Consolidated statements of operations for the three months and nine months     5
ended March 31, 2002 and 2001 (Unaudited)

Consolidated statements of cash flows for the nine months                    6-7
ended March 31, 2002 and 2001 (Unaudited)

Notes to consolidated financial statements                                  8-13

Item 2. - Management's Discussion and Analysis of Financial Condition      14-20
          and Results of Operations

Item 3. - Quantitative and Qualitative Disclosures About Market Risk          20

Part II. - Other Information

Item 1. - Legal Proceedings                                                   21

Item 6. - Exhibits and Reports on Form 8-K                                    21

Signatures                                                                    21


                                                                               2
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                                     Consolidated Balance Sheets

================================================================================

<TABLE>
<CAPTION>
                                                                   March 31, 2002    June 30, 2001
                                                                  ----------------  ---------------
                                                                     (Unaudited)
<S>                                                                 <C>              <C>
Assets

Current
    Cash and cash equivalents                                       $         --     $  2,724,000
    Accounts receivable, less allowance for doubtful
        accounts and sales returns of $1,272,000 and $1,260,000       24,369,000       19,483,000
    Inventories                                                       12,311,000       11,043,000
    Prepaid expenses and other current assets                            966,000          697,000
    Refundable income taxes                                              535,000          653,000
    Deferred tax asset                                                 1,205,000        1,205,000
    Net current assets of discontinued operations                             --          371,000
-------------------------------------------------------------------------------------------------

Total Current Assets                                                  39,386,000       36,176,000

Property and Equipment, net                                            5,173,000        5,994,000

Intangible Assets
    Excess of cost over net assets acquired, net                      59,632,000       59,632,000
    Deferred financing costs, net of accumulated
        amortization of $475,000 and $562,000                          3,600,000        3,001,000
    Non-compete agreements, net of accumulated
        amortization of $318,000 and $132,000                          1,192,000        1,378,000
    Package tooling costs, net of accumulated
        amortization of $1,727,000 and $1,390,000                      1,275,000        1,371,000
    Product rights, patents and trademarks, net of
        accumulated amortization of $173,000 and $85,000                 560,000          559,000

Officer Receivables                                                      552,000          521,000

Net Long-Term Assets of Discontinued Operations                          117,000               --

Other Assets                                                              26,000          304,000
-------------------------------------------------------------------------------------------------

Total Assets                                                        $111,513,000     $108,936,000
-------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                                                               3
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                                     Consolidated Balance Sheets

================================================================================

<TABLE>
<CAPTION>
                                                                    March 31, 2002      June 30, 2001
                                                                   ----------------    ---------------
                                                                     (Unaudited)
<S>                                                                 <C>                 <C>
Liabilities and Stockholders' Equity
Current
    Lines-of-credit                                                 $   9,921,000       $  21,650,000
    Accounts payable                                                    8,871,000           3,293,000
    Accrued rebates                                                     1,288,000           1,618,000
    Accrued freight                                                       630,000             434,000
    Accrued commissions                                                 1,133,000           1,279,000
    Accrued co-op advertising                                             808,000             732,000
    Accrued restructuring costs                                                --             999,000
    Accrued expenses                                                    1,334,000           1,285,000
    Current portion of bank term loan                                     400,000                  --
-----------------------------------------------------------------------------------------------------
Total Current Liabilities                                              24,385,000          31,290,000

Revolving Credit Facility                                               6,000,000                  --
Long Term Debt                                                          7,370,000                  --
Deferred Tax Liability                                                  1,205,000           1,205,000
Net Long-Term Liabilities of Discontinued Operations                           --             263,000
Other Long Term Liabilities                                                    --              20,000
Company Obligated Mandatorily Redeemable
    Preferred Securities of Subsidiary Trust Holding
    Solely Junior Subordinated Debentures                              56,951,000          56,951,000
-----------------------------------------------------------------------------------------------------
Total Liabilities                                                      95,911,000          89,729,000
-----------------------------------------------------------------------------------------------------
Minority Interest in Equity of Affiliate                                1,239,000           1,239,000
-----------------------------------------------------------------------------------------------------

Stockholders' Equity
    Preferred stock, 1,000,000 shares authorized and unissued                  --                  --
    Common stock, $0.001 par value - shares authorized,
        75,000,000; 21,433,000 shares issued at March 31, 2002
        and June 30, 2001                                                  21,000              21,000
    Additional paid-in capital                                         52,337,000          51,846,000
    Retained deficit                                                  (25,167,000)        (21,071,000)
-----------------------------------------------------------------------------------------------------
                                                                       27,191,000          30,796,000

Less: Treasury Stock, 3,890,000 shares
    at cost at March 31, 2002 and June 30, 2001                       (12,828,000)        (12,828,000)
-----------------------------------------------------------------------------------------------------
Total Stockholders' Equity                                             14,363,000          17,968,000
-----------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                          $ 111,513,000       $ 108,936,000
-----------------------------------------------------------------------------------------------------
</TABLE>

                     See accompanying notes to consolidated financial statements


                                                                               4
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                           Consolidated Statements of Operations

===============================================================================

<TABLE>
<CAPTION>
                                                                      Three Months Ended                  Nine Months Ended
                                                                           March 31,                          March 31,
                                                               --------------------------------------------------------------------
                                                                       2002               2001             2002               2001
-----------------------------------------------------------------------------------------------------------------------------------
                                                                           Unaudited                          Unaudited
                                                               --------------------------------------------------------------------
<S>                                                            <C>                <C>              <C>                <C>
Net sales                                                      $ 24,278,000       $ 26,508,000     $ 49,567,000       $ 50,978,000
Cost of Sales                                                    12,826,000         14,660,000       28,148,000         30,775,000
-----------------------------------------------------------------------------------------------------------------------------------
Gross Profit                                                     11,452,000         11,848,000       21,419,000         20,203,000
-----------------------------------------------------------------------------------------------------------------------------------
Operating Expenses
    Selling and shipping                                          5,081,000          4,882,000       12,533,000         11,738,000
    General and administrative                                    2,083,000          2,432,000        6,349,000          5,892,000
    Restructuring charges                                                --            650,000               --            650,000
    Depreciation                                                    187,000            216,000          561,000            703,000
    Goodwill amortization                                                --            752,000               --          2,181,000
    Other amortization                                              241,000             60,000          501,000            337,000
    Write off of deferred financing costs                                --                 --          254,000                 --
-----------------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses                                          7,592,000          8,992,000       20,198,000         21,501,000
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Operations                                     3,860,000          2,856,000        1,221,000         (1,298,000)
Other Income (Expense)
    Investment income                                                12,000            136,000           82,000            235,000
    Interest expense                                             (1,823,000)        (1,993,000)      (5,400,000)        (5,417,000)
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations Before
    Income Taxes and Extraordinary Gain                           2,049,000            999,000       (4,097,000)        (6,480,000)
Income Tax Benefit (Expense)                                             --         (1,116,000)              --          2,471,000
-----------------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations Before
    Extraordinary Gain                                            2,049,000           (117,000)      (4,097,000)        (4,009,000)
Discontinued Operations -
    Loss from discontinued operations net of tax benefit of
    $433,000 and $2,882,000, respectively, and minority
    interest of $343,000 and $769,000, respectively,
    in 2001                                                              --         (1,654,000)              --         (3,514,000)
-----------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) Before Extraordinary Gain                       2,049,000         (1,771,000)      (4,097,000)        (7,523,000)
Extraordinary gain on purchase of Trust
Preferred Securities, net of income taxes                                --                 --               --              4,000
-----------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                              $  2,049,000       $ (1,771,000)    $ (4,097,000)      $ (7,519,000)
-----------------------------------------------------------------------------------------------------------------------------------
Per Share Amounts:
Weighted Average Common Shares
    Outstanding- Basic                                           17,543,000         17,638,000       17,543,000         18,212,000
Weighted Average Common Shares
    Outstanding- Diluted                                         17,915,000         17,638,000       17,543,000         18,212,000
Income (Loss) from Continuing Operations per
Common Share Before Extraordinary
    Gain - Basic and Diluted                                   $        .12               (.01)    ($       .23)      ($       .22)
Discontinued operations                                                  --               (.09)              --               (.19)
Extraordinary gain                                                       --                 --               --                 --
-----------------------------------------------------------------------------------------------------------------------------------
Net Income (Loss)                                              $        .12       ($       .10)    ($       .23)      ($       .41)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                                                               5
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                           Consolidated Statements of Cash Flows

===============================================================================

<TABLE>
<CAPTION>
Nine months ended March 31,                                            2002             2001
---------------------------------------------------------------------------------------------
                                                                          Unaudited
                                                               ------------------------------
<S>                                                            <C>              <C>
Cash Flows from Operating Activities:
    Net loss from continuing operations before
        extraordinary gain                                     $ (4,097,000)    $ (4,005,000)
    Adjustments to reconcile net loss to net cash used
        in operating activities:
        Depreciation and amortization                             2,278,000        4,169,000
        Write off of deferred financing costs                       254,000               --
        Extraordinary gain                                               --           (4,000)
        Compensation related to stock options                        89,000          231,000
        Deferred Income Taxes                                            --         (805,000)
        Changes in operating assets and liabilities, net of
         assets acquired and liabilities assumed:
           Accounts receivable                                   (4,886,000)      (6,082,000)
           Inventories                                           (1,268,000)      (5,752,000)
           Prepaid expenses and other current assets               (151,000)        (215,000)
           Accounts payable and accrued expenses                  4,404,000        2,053,000
           Other assets                                             279,000          224,000
---------------------------------------------------------------------------------------------

Net Cash Used In Operating Activities                            (3,098,000)     (10,186,000)
---------------------------------------------------------------------------------------------

Cash Flows for Investing Activities:
    Purchase of property and equipment                             (586,000)        (932,000)
    Purchase of intangibles                                        (329,000)        (411,000)
    Increase in officer receivables                                 (31,000)         (61,000)
    Decrease in restricted cash                                          --        1,582,000
    Payment for purchase of business, net of
        cash acquired                                                    --         (413,000)
---------------------------------------------------------------------------------------------

Net Cash Used in Investing Activities                              (946,000)        (235,000)
---------------------------------------------------------------------------------------------
</TABLE>


                    See accompanying notes to consolidated financial statements.


                                                                               6
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                           Consolidated Statements of Cash Flows

================================================================================

<TABLE>
<CAPTION>
Nine months ended March 31,                                            2002             2001
--------------------------------------------------------------------------------------------
                                                                         Unaudited
                                                               -----------------------------
<S>                                                            <C>              <C>
Cash Flows from Financing Activities:
    (Payments)/proceeds on lines-of-credit                     $ (5,729,000)    $ 17,900,000
    Proceeds from long term debt                                  8,250,000               --
    Deferred finance costs                                       (1,059,000)              --
    Principal payments on long-term debt                           (133,000)              --
    Repurchase of common stock for treasury                              --       (2,082,000)
    Purchase of mandatorily redeemable preferred securities              --          (22,000)
    Other                                                                --           (6,000)
---------------------------------------------------------------------------------------------
Net Cash Provided By Financing Activities                         1,329,000       15,790,000
---------------------------------------------------------------------------------------------

Net (decrease) increase in cash and cash equivalents from
    continuing operations                                        (2,715,000)       5,369,000
Cash used in discontinued operations                                 (9,000)      (6,802,000)
---------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                        (2,724,000)      (1,433,000)

Cash and Cash Equivalents, beginning of period                    2,724,000        3,474,000
---------------------------------------------------------------------------------------------

Cash and Cash Equivalents, end of period                       $         --     $  2,041,000
---------------------------------------------------------------------------------------------

Supplemental Disclosure of Cash Flow
Information
    Cash paid for interest                                     $  5,099,000     $  3,190,000
    Cash paid (refund received) for income taxes               $     58,000     $    (14,000)
---------------------------------------------------------------------------------------------

Non-Cash Investing and Financing Activities
    Issuance of 16% subordinated notes at
       90% of face amount                                      $    600,000     $         --
    Issuance of warrants and options in
       conjunction with debt refinancing                       $    402,000     $         --
---------------------------------------------------------------------------------------------
</TABLE>

                    See accompanying notes to consolidated financial statements.


                                                                               7
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                      Notes to Consolidated Financial Statements

================================================================================

1.   The accompanying  consolidated  financial  statements at March 31, 2002 and
     for the three  months and nine  months  ended  March 31,  2002 and 2001 are
     unaudited,  but, in the  opinion of  management,  include  all  adjustments
     necessary for a fair  presentation of consolidated  financial  position and
     results of operations for the periods  presented.  The results for the nine
     months ended March 31, 2002 are not  necessarily  indicative of the results
     of operations for a full year. Certain amounts as previously  reported have
     been reclassified to conform to current year classifications.

2.   Refer to the audited  consolidated  financial statements for the year ended
     June 30, 2001, for details of accounting policies and detailed notes to the
     consolidated financial statements.

3.   Inventories consist of:

                      March 31, 2002   June 30, 2001
     -----------------------------------------------

     Raw materials     $ 5,658,000      $ 6,290,000
     Finished goods      6,653,000        4,753,000
     ----------------------------------------------

                       $12,311,000      $11,043,000
     ----------------------------------------------

4.   On November 15, 2001, the Company secured  financing from a bank to provide
     up to  $33,000,000  in senior  secured  financing  due three years from the
     closing date.  The financing  provides for a $31,000,000  revolving  credit
     facility and a $2,000,000 term loan due in monthly  installments of $33,000
     plus interest. The term loan balance outstanding, net of current portion of
     $400,000,  of  $1,467,000  is  included  in long  term  debt.  Interest  on
     borrowings  is  calculated  at  variable  annual  rates based on either the
     bank's prime rate plus an  applicable  marginal  rate or the federal  funds
     rate  plus an  applicable  marginal  rate  (effectively  5.25% at March 31,
     2002).  Borrowings  on the revolving  credit  facility are limited based on
     eligible  borrowing bases. At March 31, 2002 the Company had $15,921,000 of
     borrowings  outstanding  under  the  revolving  credit  facility,  of which
     $9,921,000 has been classified as current.

     The  Company's   obligations   under  the  revolving  credit  facility  are
     guaranteed by its subsidiaries and secured by a security  interest in favor
     of the bank in  substantially  all of the  assets  of the  Company  and its
     subsidiaries.  Upon the  occurrence  of an event of default as specified in
     the  financing  agreement,  the  maturity  of loans  outstanding  under the
     financing  agreement  may  be  accelerated  by the  bank,  which  may  also
     foreclose  its  security  interest  on the  assets of the  Company  and its
     subsidiaries.

     At March 31, 2002,  the Company had  borrowings  outstanding of $5,903,000,
     net of discounts of $946,000, pursuant to subordinated secured notes due in
     November 2007 with an effective interest rate of 18.4%. Interest is charged
     on the face of the notes at 16% and 14% per  annum,  payable  monthly.  The
     issue  price of the 16%  notes  was 90% of the  face  amount  of the  notes
     resulting in a discount of $600,000. The notes are secured by a second lien
     on all  assets  of the  Company  and rank  junior to the  senior  financing
     provided by the bank. In connection with this


                                                                               8
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                      Notes to Consolidated Financial Statements

================================================================================

     financing,  the Company  issued to the  purchasers of the notes warrants to
     purchase up to 3.75% of the fully  diluted  common stock of the Company and
     granted to the  purchasers an option to purchase  from the Company  certain
     Trust Preferred Securities of the Company's subsidiary,  U.S. Home & Garden
     Trust I, that are owned by the  Company,  which  resulted  in a discount of
     $402,000.

     Under the two financing  agreements,  the Company and its  subsidiaries are
     required,  among other things,  to comply with (a) certain  limitations  on
     incurring additional indebtedness, liens and guarantees, on dispositions of
     assets,  payment of cash dividends and cash  redemption and  repurchases of
     securities, and (b) certain limitations on mergers,  liquidations,  changes
     in business,  investments,  loans and advances,  affiliate transactions and
     certain  acquisitions.  In  addition,  the Company must comply with certain
     financial  tests  and  ratios.  A  violation  of  any  of  these  covenants
     constitutes  an event of default under the financing  agreements.  At March
     31, 2002, the Company was in compliance with the financial covenants.

5.   In  June  2001,  the  Company  announced  that  it  was  discontinuing  its
     e-commerce  initiative,  which it was  conducting  through its  subsidiary,
     Egarden,  Inc.  (Egarden),  effective June 30, 2001.  During the year ended
     June 30, 2001, the Company  recorded a net loss on disposal of discontinued
     operations of $4,551,000, net of minority interest of $1,118,000. The loss,
     prior to minority interest, included the write-off of all long-lived assets
     of $5,224,000 and severance  expense of $445,000 related to the termination
     of all 39  employees.  All  severance  payments have been made at March 31,
     2002.  No  adjustments  were made to the  liability  recorded for severance
     payments during the period ended March 31, 2002. The Company had a net loss
     from the  operations  of  Egarden  of  $1,654,000  and  $3,514,000,  net of
     minority  interest of $343,000 and $769,000,  for the three months and nine
     months ended March 31, 2001.  Revenues of the  discontinued  operations for
     the three months and nine months ended March 31, 2001 were not material.

     The net assets and liabilities of discontinued  operations  reported in the
     consolidated balance sheets consisted of the following:

<TABLE>
<CAPTION>
                                                  March 31, 2002    June 30, 2001
     ----------------------------------------------------------------------------
<S>                                                <C>               <C>
     Current assets                                $    14,000       $   882,000
     Current liabilities                               (14,000)         (511,000)
     ----------------------------------------------------------------------------
     Net current assets                            $        --       $   371,000
     ----------------------------------------------------------------------------

     Net long-term assets (liabilities)            $   117,000       $  (263,000)
     ----------------------------------------------------------------------------

     Minority interest in equity of affiliate      $(1,239,000)      $(1,239,000)
     ----------------------------------------------------------------------------
</TABLE>


                                                                               9
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                      Notes to Consolidated Financial Statements

================================================================================

     Pursuant to APB  Opinion No. 30,  Reporting  the  Results of  Operations  -
     Reporting  the  Effects  of  Disposal  of  a  Segment  of a  Business,  and
     Extraordinary,  Unusual and Infrequently Occurring Events and Transactions,
     the  Company's  consolidated  financial  statements  and  notes  have  been
     restated  for all  periods  presented  to reflect  the  discontinuation  of
     Egarden.  The net  operating  results,  net  assets  and net cash  flows of
     Egarden have been reported as "Discontinued Operations" in the accompanying
     consolidated  financial  statements.  The restated  notes  exclude  amounts
     related to these discontinued operations.

6.   During  the  fiscal  year  ended  June 30,  2001,  the  Company  recorded a
     restructuring  charge of $2,860,000 relating to the closing and sale of its
     subsidiary's  Ampro  Industries  Inc.  facility  in  Michigan.  The Company
     intends to  continue  to sell  products,  through a contract  manufacturing
     agreement, being manufactured at the former Ampro facility. As part of this
     agreement, the Company has a firm commitment to purchase minimum quantities
     of product in the fiscal year ended June 30,  2002.  As of March 31,  2002,
     the  Company  has  purchased  approximately  $899,000  of product  from the
     subcontractor.  The Company  estimates  that for the fiscal year ended June
     30,  2002,  it may  have to pay up to an  additional  $60,000  to meet  the
     minimum  quantities  requirement.  However,  the contract  includes an exit
     provision,  whereby the maximum cost to the Company of  termination  of the
     agreement is $332,000.  During the period ended June 30, 2001,  the Company
     recognized  approximately $1,709,000 of expenses and losses relating to the
     closing  and sale of  property  and  equipment  of the Ampro  facility  and
     $1,151,000 for termination  benefits to be paid to all 60 former  employees
     at the Ampro  facility.  Approximately  $45,000 of severance  payments as a
     result of the  restructuring  was unpaid as of March 31, 2002. All payments
     are expected to be completed by June 30, 2002. No adjustments  were made to
     the liability  recorded for severance payments during the nine months ended
     March 31, 2002.

7.   In June 2001, the Financial  Accounting  Standards  Board (FASB)  finalized
     Statement  of  Financial  Accounting  Standards  (SFAS) No.  141,  Business
     Combinations,  and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS
     No. 141 requires the use of the purchase method of accounting and prohibits
     the  use of the  pooling-of-interest  method  of  accounting  for  business
     combinations initiated after June 30, 2001. SFAS No. 141 also requires that
     the Company recognize acquired intangible assets apart from goodwill if the
     acquired  intangible assets meet certain criteria.  SFAS No. 141 applies to
     all business  combinations  initiated  after June 30, 2001 and for purchase
     business combinations completed on or after July 1, 2001. SFAS No. 141 also
     requires,  upon adoption of SFAS No. 142, that the Company  reclassify  the
     carrying  amounts of  goodwill  and other  intangible  assets  based on the
     criteria of SFAS No. 141.

     SFAS No.  142  requires,  among  other  things,  that  companies  no longer
     amortize  goodwill,  but instead  test  goodwill  for  impairment  at least
     annually.  In  addition,  SFAS No. 142 requires  that the Company  identify
     reporting units for the purpose of assessing  potential future  impairments
     of  goodwill,  reassess  the  useful  lives  of other  existing  recognized
     intangible  assets,  and cease  amortization  of intangible  assets with an
     indefinite  useful life. An intangible asset with an indefinite useful life
     should be tested for  impairment in accordance  with the guidelines in SFAS
     No. 142.  SFAS No. 142 is required to be applied in fiscal years  beginning
     after  December  15,  2001 to all  goodwill  and  other  intangible  assets
     recognized  at that date,  regardless  of when those assets were  initially
     recognized.


                                                                              10
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                      Notes to Consolidated Financial Statements

================================================================================


     SFAS No.  142  requires  the  Company to  complete a two-step  transitional
     goodwill  impairment  test, with the first step to be completed  within six
     months of the date of adoption.  The first step, used to identify potential
     impairment,  compares the fair value of a reporting  unit with its carrying
     value. If it is determined that the carrying value of the net assets of the
     reporting  unit  (including  goodwill)  exceeds  the  fair  value  of  that
     reporting unit, the second step must be performed as soon as possible,  but
     no later  than the end of the year of  initial  adoption,  to  measure  the
     amount of the  impairment  loss, if any. An impairment  loss resulting from
     the transitional  goodwill impairment test is recognized as the effect of a
     change in accounting principle.

     The Company  has  elected to adopt SFAS No. 141 and SFAS No. 142  effective
     July 1, 2001.  The adoption of SFAS No. 141 had no effect on the  Company's
     financial  statements  for the nine  months  ended  March  31,  2002 as the
     Company  engaged in no business  acquisitions  during this period and there
     were no  reclassifications  between goodwill and other  intangible  assets.
     During the three months ended  September 30, 2001, the Company  completed a
     reassessment of the useful lives of other  intangible  assets,  which total
     $6,627,000  (net of  accumulated  amortization  of $2,719,000) at March 31,
     2002.  As a  result,  no  adjustments  were made to  previously  determined
     amortization  periods. The Company has no intangible assets with indefinite
     useful lives at March 31, 2002.

     The Company  completed step one of the SFAS No. 142  transitional  goodwill
     impairment  test during the quarter ended  December 31, 2001.  The carrying
     value of the net assets of the Ampro reporting unit exceeds its fair value.
     Goodwill   associated   with  the  purchase  of  Ampro  was   approximately
     $17,078,000,  net of  accumulated  amortization,  at  March  31,  2002.  As
     disclosed at June 30, 2001,  the Company  restructured  the  operations  of
     Ampro during the year ended June 30, 2001. This restructuring  included the
     closing and sale of the Ampro facility in Michigan.  The Company  currently
     continues  to  sell  Ampro  products,   through  a  contract  manufacturing
     agreement,   being   manufactured  at  the  former  Ampro  facility.   This
     restructuring  is currently being  considered by the Company in conjunction
     with the transitional  goodwill  impairment test being  completed.  Outside
     valuation  professionals are currently  assisting the Company with step two
     of the  transitional  goodwill  impairment  test to measure the  impairment
     loss. The impairment loss will be recorded no later than June 30, 2002.

     The Company's  previous business  combinations were accounted for using the
     purchase  method.  As a  result  of  such  combinations,  the  Company  has
     recognized a significant amount of goodwill,  which, in the aggregate,  was
     approximately  $59,632,000,  net of accumulated amortization,  at March 31,
     2002. Amortization expense for all intangible assets during the nine months
     ended March 31, 2002 and 2001 was $1,070,000 and $2,878,000,  respectively.
     Amortization expense included $2,181,000 for goodwill  amortization for the
     nine months ended March 31, 2001.  Estimated  amortization expense for each
     of the five succeeding fiscal years is as follows:

          Year Ended June 30,
          -----------------------------------------------

          2002                                 $1,478,000
          2003                                 $1,468,000
          2004                                 $1,468,000
          2005                                 $1,288,000
          2006                                 $1,108,000


                                                                              11
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                      Notes to Consolidated Financial Statements

================================================================================

     The following  represents a reconciliation  of the reported net loss to the
     adjusted net loss and the adjusted net loss before  extraordinary  gain for
     the three months and the nine months ended March 31,  2001,  which  exclude
     goodwill amortization expense, net of tax benefit:

<TABLE>
<CAPTION>
                                                        Three Months Ended   Nine Months Ended
                                                        --------------------------------------
                                                                     March 31, 2001
      --------------------------------------------------------------------------------------
<S>                                                       <C>                   <C>
      Reported Net Loss                                   $  (1,771,000)        $(7,519,000)
      Goodwill amortization, net of tax benefit of
      $115,000 and $480,000                                     587,000           1,701,000
      --------------------------------------------------------------------------------------
      Adjusted Net Loss                                      (1,184,000)         (5,818,000)
      Extraordinary gain                                             --               4,000
      --------------------------------------------------------------------------------------
      Adjusted Net Loss Before Extraordinary Gain
                                                          $  (1,184,000)        $(5,822,000)

      --------------------------------------------------------------------------------------
      Per Share Amounts:
      Reported Net Loss                                   $        (.10)        $      (.41)
      Goodwill amortization, net of tax benefit                     .03                 .09
      --------------------------------------------------------------------------------------
      Adjusted Net Loss                                            (.07)               (.32)
      Extraordinary gain                                             --                  --
      --------------------------------------------------------------------------------------
      Adjusted Net Loss Before Extraordinary Gain         $        (.07)        $      (.32)
      --------------------------------------------------------------------------------------
</TABLE>


8.   In the normal  course of business,  the Company is subject to  proceedings,
     lawsuits, and other claims, including proceedings under laws and government
     regulations  related to product safety and other matters.  Such matters are
     subject  to many  uncertainties,  and  outcomes  are not  predictable  with
     assurance.  Consequently,  the  ultimate  amount of monetary  liability  or
     financial  impact with respect to these matters at March 31, 2002 cannot be
     ascertained.

     During fiscal 2001, the U.S.  Consumer Product Safety  Commission  ("CPSC")
     began  an  investigation  into  a  product  previously  distributed  by the
     Company's Weed Wizard  subsidiary.  This  investigation  could result in an
     adverse  outcome  for the  Company.  While  the  amount  of loss  cannot be
     reasonably  estimated at this time, the approximate  maximum potential loss
     is $1.6 million. The Company has vigorously defended,  and will continue to
     vigorously  defend,  its actions  with respect to this  subsidiary  and its
     discontinued product.


                                                                              12
<PAGE>

                                        U.S. Home & Garden Inc. and Subsidiaries


                                      Notes to Consolidated Financial Statements

================================================================================

In fiscal 2001, the Company commenced an action against A.A.B.B., Inc. (formerly
known as Weed Wizard,  Inc.) and certain  stockholders and officers  relating to
the purchase  from the  defendants  of  substantially  all of the assets of Weed
Wizard,  Inc. by the Company.  The Company is seeking to rescind the transaction
or to recover monetary damages.  A.A.B.B.,  Inc. has asserted a counterclaim for
breach of contract against the Company for $720,000, plus interest, representing
an alleged adjustment to the purchase price.

In November  2001,  the Company was notified by the staff of the CPSC that a cap
on one of the  Company's  products  sold prior to June 30,  2000 was found to be
defective.  The  Company  recently  agreed  to  a  voluntary  corrective  action
providing  replacement  caps for earlier  versions of the caps. Costs related to
the voluntary corrective action is not expected to be significant.


                                                                              13
<PAGE>

Item 2.

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for  forward-looking  statements.  Certain  information  included in this Report
contains  statements that are  forward-looking,  such as statements  relating to
plans for the Company's  future  activities.  Such  forward-looking  information
involves  important  known  and  unknown  risks  and  uncertainties  that  could
significantly  affect actual results,  performance or achievements in the future
and,  accordingly,   such  actual  results,   performance  or  achievements  may
materially  differ  from  those  expressed  or  implied  in any  forward-looking
statements made by or on behalf of the Company.

These risks and uncertainties include, but are not limited to, those relating to
the Company's growth strategy, customer concentration, outstanding indebtedness,
dependence on weather conditions, seasonality, expansion and other activities of
competitors,  ability to successfully  integrate  acquired companies and product
lines,  changes in federal or state environmental laws and the administration of
such laws,  protection of trademarks and other proprietary  rights,  litigation,
and the  general  condition  of the  economy  and its  effect on the  securities
markets  and other  risks  detailed  in the  Company's  other  filings  with the
Securities and Exchange Commission. The words "believe," "expect," "anticipate,"
"intend" and "plan" and similar expressions identify forward-looking statements.
Readers  are  cautioned  not to place undue  reliance  on these  forward-looking
statements, which speak only as of the date the statement was made.

General

U.S. Home & Garden Inc., ("the Company"), manufactures and markets a broad range
of  brand-name  consumer  lawn and garden  products  through  its  wholly  owned
subsidiaries,  Ampro  Industries,  Inc.  ("Ampro"),  Easy Gardener,  Inc. ("Easy
Gardener"),  and Golden West  Agri-Products,  Inc., and Easy  Gardener's  wholly
owned  subsidiaries,  Weatherly  Consumer  Products Group,  Inc. and Weed Wizard
Acquisition  Corp. Since 1992, the Company  consummated  eleven  acquisitions of
complementary  lawn and garden  companies  and  product  lines for an  aggregate
consideration   of   approximately   $111,000,000  in  cash,  notes  and  equity
securities.  As  a  result  of  such  acquisitions,  the  Company  recognized  a
significant amount of goodwill, which, in the aggregate, was $59,632,000, net of
accumulated amortization, at June 30, 2001 and March 31, 2002.

Results of Operations

The following  table sets forth,  for the periods  indicated,  certain  selected
financial data as a percentage of net sales:

<TABLE>
<CAPTION>
                                             Three Months Ended       Nine Months Ended
                                                  March 31,              March 31,
                                              2002        2001        2002        2001
                                              ----        ----        ----        ----
<S>                                          <C>         <C>         <C>         <C>
Net sales                                    100.0%      100.0%      100.0%      100.0%
Cost of sales                                 52.8        55.3        56.8        60.4
                                             ------------------      ------------------
Gross profit                                  47.2        44.7        43.2        39.6
Selling and shipping expenses                 20.9        18.4        25.3        23.0
General and administrative expenses            8.6         9.2        12.8        11.6
Restructuring                                   --         2.4          --         1.3
Depreciation and amortization                  1.8         3.9         2.1         6.3
Write off of deferred financing costs           --          --          .5          --
                                             ------------------      ------------------
Income (loss) from operations                 15.9        10.8         2.5        (2.6)
Interest expense, net                         (7.5)       (7.0)      (10.8)      (10.1)
Income tax benefit                              --        (4.2)         --         4.8
                                             ------------------      ------------------
Income (loss) from continuing operations
                                               8.4         (.4)       (8.3)       (7.9)
 Loss from discontinued operations              --        (6.3)         --        (6.9)
                                             ------------------      ------------------
 Net income (loss)                             8.4%       (6.7)%      (8.3)%     (14.8)%
                                             ------------------      ------------------
</TABLE>


                                                                              14
<PAGE>


Three Months Ended March 31, 2002 Compared to Three Months Ended March 31, 2001

Net sales. Net sales decreased by $2,230,000, or 8.4%, to $24,278,000 during the
three months ended March 31, 2002 from $26,508,000  during the comparable period
in 2001.  The decrease in net sales was due to a change in buying pattern by key
customers  who are buying less product to be held for their  inventory  prior to
the selling  season and  replenishing  inventory  levels only as sales are made.
During the three months ended March 31, 2002 the Company  increased  its product
presence at its largest  customer and experienced a loss of a product listing at
its second largest customer.

Gross profit.  Gross profit  decreased by $396,000,  or 3.3%, to $11,452,000 for
the three months  ended March 31, 2002 from  $11,848,000  during the  comparable
period in 2001.  Gross  profit as a percentage  of net sales  increased to 47.2%
during the three months ended March 31, 2002,  from 44.7% during the  comparable
period in 2001.  This  increase in gross profit as a percentage  of net sales is
due to a decrease in cost of sales as a result of the  restructuring and closing
of the Bradley,  Michigan  facility,  a reduction in certain raw material costs,
and increased operating efficiencies.

Selling and  shipping  expenses.  Selling and  shipping  expenses  increased  by
$199,000,  or 4.1%, to  $5,081,000  during the three months ended March 31, 2002
from  $4,882,000  during the  comparable  period in 2001. As a percentage of net
sales,  selling and shipping expenses increased to 20.9% during the three months
ended  March 31,  2002 from 18.4%  during  the  comparable  period in 2001.  The
increase  in  expense  and  increase  as a percent  of net  sales was  primarily
attributable to increases in outbound freight costs.

General  and  administrative  expenses.   General  and  administrative  expenses
decreased by $349,000,  or 14.4%,  to  $2,083,000  during the three months ended
March 31,  2002 from  $2,432,000  during  the  comparable  period in 2001.  This
decrease  is  primarily  due to the closing of Bradley,  Michigan  facility  and
management's  continued  efforts to reduce  costs.  The decrease  was  partially
offset  by  write-offs  and  other  charges   including  the  Kmart  Corporation
bankruptcy  and a product  corrective  action.  As a  percentage  of net  sales,
general and  administrative  expenses  decreased to 8.6% during the three months
ended March 31, 2002 from 9.2% during the comparable period in 2002.

Restructuring. The Company reserved $650,000 during the three months ended March
31,  2001  related to the  restructuring  and closing of the  Bradley,  Michigan
facility. No similar costs were incurred during the comparable period in 2002.

Depreciation,   amortization,   and  write  off  of  deferred  financing  costs.
Depreciation,  amortization,  and write-off of deferred financing costs expenses
decreased  by $600,000 or 58.4% to $428,000  during the three months ended March
31, 2002 from $1,028,000  during the comparable period in 2001. This decrease is
primarily  a  result  of the  adoption  of SFAS No.  142,  "Goodwill  and  Other
Intangible  Assets"  ("SFAS 142") in July 2001.  SFAS 142 requires,  among other
things,  that companies no longer amortize  goodwill,  but instead test goodwill
for impairment at least annually. As a percentage of net sales, depreciation and
amortization,  decreased  to 1.8% during the three  months  ended March 31, 2002
from 3.9% during the comparable period in 2001.

Income (loss) from operations.  Income from operations  increased by $1,004,000,
or 35.2%,  to  $3,860,000  during the three months  ended March 31,  2002,  from
$2,856,000  during the  comparable  period in 2001.  The increase in income from
operations was primarily due to increased gross profit and other expense changes
noted above. As a percentage of net sales,  income from operations  increased to
15.9% for the three months ended March 31, 2002 from 10.8% during the comparable
period in 2001.

Interest  expense,  net.  Net interest  expense  decreased  $46,000,  or 2.5% to
$1,811,000  during the three months ended March 31, 2002, from $1,857,000 during
the comparable  period in 2001. The slight decrease in interest  expense results
from lower borrowing levels in 2002.


                                                                              15
<PAGE>

Income taxes.  Income tax expense  decreased to $0 during the three months ended
March 31, 2002 from $1,116,000  expense during the comparable period in 2001. No
income tax was recorded  for the three  months ended March 31, 2002,  due to the
net operating loss carry forward.

Discontinued   operations.   Loss  from  discontinued  operations  decreased  by
$1,654,000  to $0 during  the  three  months  ended  March  31,  2002,  from the
comparable period in 2001. The decrease in loss from discontinued  operations is
due to the Company's  decision to discontinue  the  operations of Egarden,  Inc.
during the quarter ended June 30, 2001.

Net income (loss).  Net income increased by $3,820,000 to $2,049,000  during the
three  months  ended  March 31,  2002 from a net loss of  $1,771,000  during the
comparable  period in 2001.  Net income per common  share  increased to $.12 per
share for the three months ended March 31, 2002 from net loss of $0.10 per share
during the comparable  period in 2001. The increase in net income and net income
per common  share is due  primarily  to not having  restructuring  costs and the
decrease in  goodwill  amortization  costs and not having a loss  related to the
discontinued  operations.  There were fewer  weighted  average common and common
equivalent shares  outstanding in the three months ended March 31, 2002 compared
to the  comparable  period in the prior year due to the Company's  repurchase of
shares of its common stock in fiscal 2001.


Nine Months Ended March 31, 2002 Compared to Nine Months Ended March 31, 2001

Net sales. Net sales decreased by $1,411,000, or 2.8%, to $49,567,000 during the
nine months ended March 31, 2002 from $50,978,000  during the comparable  period
in 2001.  The  decrease  in net  sales was  primarily  due to a change in buying
pattern  by key  customers  who  are  buying  less  inventory  and  replenishing
inventory levels as sales are made.

Gross profit. Gross profit increased by $1,216,000,  or 6.0%, to $21,419,000 for
the nine  months  ended March 31, 2002 from  $20,203,000  during the  comparable
period in 2001.  Gross  profit as a percentage  of net sales  increased to 43.2%
during the nine months  ended March 31, 2002,  from 39.6% during the  comparable
period in 2001.  This  increase in gross profit as a percentage  of net sales is
due to a decrease in cost of sales as a result of the  restructuring and closing
of the Bradley, Michigan facility, a reduction in certain raw material costs and
increased operating efficiencies.

Selling and  shipping  expenses.  Selling and  shipping  expenses  increased  by
$795,000,  or 6.8%, to  $12,533,000  during the nine months ended March 31, 2002
from  $11,738,000  during the comparable  period in 2001. As a percentage of net
sales,  selling and shipping expenses  increased to 25.3% during the nine months
ended  March 31,  2002 from 23.0%  during the  comparable  period in 2001.  This
increase  in  expense  and  increase  as a percent  of net  sales was  primarily
attributable  to increases in outbound  freight  costs for the nine months ended
March 31, 2002.

General  and  administrative  expenses.   General  and  administrative  expenses
increased by $457,000, or 7.8%, to $6,349,000 during the nine months ended March
31, 2002 from $5,892,000  during the comparable period in 2001. This increase is
primarily  due to the  allocation  of  certain  costs in the  prior  year to the
discontinued startup operations of Egarden,  Inc. The increase also results from
write-offs and other charges  including the Kmart  Corporation  bankruptcy and a
product corrective action. All general and administrative  costs during the nine
months ended March 31, 2002 were charged to continuing operations. This increase
is  partially  offset by savings from  increased  operating  efficiencies.  As a
percentage of net sales, general and administrative  expenses increased to 12.8%
during the nine months  ended March 31,  2002 from 11.6%  during the  comparable
period in 2001.

Restructuring.  The Company reserved $650,000 during the nine months ended March
31,  2001  related to the  restructuring  and closing of the  Bradley,  Michigan
facility. No similar costs were incurred during the comparable period in 2001.


                                                                              16
<PAGE>

Depreciation,   amortization,   and  write  off  of  deferred  financing  costs.
Depreciation,  amortization,  and write-off of deferred financing costs expenses
decreased by $1,905,000,  or 59.1%,  to $1,316,000  during the nine months ended
March 31,  2002 from  $3,221,000  during  the  comparable  period in 2001.  This
decrease  is  primarily  a result  of the  adoption  of SFAS No.  142.  SFAS 142
requires,  among other things,  that companies no longer amortize goodwill,  but
instead  test  goodwill  for  impairment  at least  annually.  The  decrease  in
depreciation  and  amortization  was  mitigated  somewhat  by the  write  off of
deferred  financing costs in conjunction with the restructuring of the Company's
debt during the second  quarter of fiscal 2002.  As a  percentage  of net sales,
depreciation,  amortization, and write-off of deferred financing costs decreased
to 2.6%  during  the nine  months  ended  March 31,  2002 from 6.3%  during  the
comparable period in 2001.

Income (loss) from operations. Income from operations increased by $2,519,000 to
$1,221,000  during the nine months ended March 31, 2002,  from a $1,298,000 loss
during the comparable period in 2001. The increase in income from operations was
primarily  due to  increased  gross  profit and other  expense  changes as noted
above. As a percentage of net sales,  income from  operations  increased to 2.5%
for the nine months ended March 31, 2002 from a 2.6% loss during the  comparable
period in 2001.

Interest  expense,  net. Net interest expense  increased  $136,000,  or 2.6%, to
$5,318,000  during the nine months ended March 31, 2002, from $5,182,000  during
the comparable period in 2001. The increase in interest expense results from the
higher  cost of the long term  subordinated  debt  offset by the lower  interest
rates on the revolving credit plus lower borrowing levels.

Income  taxes.  Income tax benefit  decreased to $0 during the nine months ended
March 31, 2002 from $2,471,000  during the comparable period in 2001. The income
tax  benefit  for each  interim  period is based  upon the  Company's  estimated
effective  income tax rate for the year.  No income tax benefit was recorded for
the nine  months  ended  March 31, 2002 due to the  uncertainty  of  realizing a
deferred tax asset.

Discontinued   operations.   Loss  from  discontinued  operations  decreased  by
$3,514,000  to $0  during  the  nine  months  ended  March  31,  2002,  from the
comparable period in 2001. The decrease in loss from discontinued  operations is
due to the Company's  decision to discontinue  the  operations of Egarden,  Inc.
during the quarter ended June 30, 2001.

Net loss. Net loss decreased by $3,422,000 to $4,097,000  during the nine months
ended March 31, 2002 from a net loss of $7,519,000  during the comparable period
in 2001.  Net loss per common  share  decreased  to $0.23 per share for the nine
months  ended  March  31,  2002  from net loss of $0.41  per  share  during  the
comparable  period in 2001.  The  decrease  in net loss and net loss per  common
share is due to the  elimination  of  goodwill  amortization  and  restructuring
charges and not having a loss related to the discontinued  operations  partially
offset by not  reflecting  a tax  benefit in 2002.  There  were  fewer  weighted
average common and common equivalent shares outstanding in the nine months ended
March 31, 2002  compared to the  comparable  period in the prior year due to the
Company's repurchase of shares of its common stock in fiscal 2001.

Seasonality

The  Company's  sales are  seasonal  due to the  nature  of the lawn and  garden
business,  in parallel with the annual growing  season.  The Company's sales and
shipping  have  traditionally  been most active from late March through May when
home lawn and garden  customers are purchasing  supplies for spring planting and
retail stores are increasing  their inventory of lawn and garden  products.  The
buying pattern of stores is changing and stores are  replenishing  supplies when
they are sold to their  customers  rather than in advance of the selling season.
Additionally,  since the Company has  adjusted  its  operations  to respond more
closely to the just-in-time  inventory management programs increasingly utilized
by its major customers,  it expects to ship an increasingly larger proportion of
its total orders on an annual basis in the  seasonally  strong fourth quarter of
the fiscal year and first quarter of the following fiscal year.


                                                                              17
<PAGE>

Sales of the Company's agricultural products, which were not material during the
nine months ended March 31, 2002, are also seasonal. Most shipments occur during
the agricultural cultivation period from March through October.

Liquidity and Capital Resources

Since inception,  the Company has financed its operations primarily through cash
generated by operations,  net proceeds from the Company's private placements and
public sales of securities and borrowings from lending institutions.

At March 31, 2002, the Company had consolidated cash and short-term  investments
totaling $0, and working capital of $15,001,000.  Under the Company's new credit
facility,  all  cash  balances  are  automatically  used to  reduce  outstanding
borrowings.  At June 30, 2001, the Company had consolidated  cash and short-term
investments totaling $2,724,000, and working capital of $4,886,000. The increase
in  working  capital  is  primarily  attributable  to  the  modification  in the
revolving credit facility allowing balances to be included in long term debt.

On November 15, 2001, the Company secured financing from a bank to provide up to
$33,000,000 in senior  secured  financing due three years from the closing date.
The financing  commitment  provides for a $31,000,000  revolving credit facility
and a $2,000,000  term loan.  Interest on  borrowings  is calculated at variable
annual rates based on either the bank's prime rate plus an  applicable  marginal
rate or the federal  funds rate plus an applicable  marginal  rate  (effectively
5.25% at March 31, 2002).  Available  borrowing on the revolving credit facility
is  limited  based on  eligible  borrowing  bases.  The bank has first  priority
perfected  security interest in substantially  all of the Company's assets.  The
Company is subject to certain  fees and  restrictions  in  conjunction  with the
financing.  At March  31,  2002,  the  Company  had  $15,921,000  of  borrowings
outstanding  under the revolving  credit  facility of which  $9,921,000 has been
classified as current.

At March 31, 2002, the Company had borrowings outstanding of $5,903,000,  net of
discounts of $946,000,  pursuant to  subordinated  secured notes due in November
2007 with an effective  interest rate of 18.4%.  Interest is charged on the face
of the notes at 16% and 14% per annum,  payable monthly.  The issue price of the
16% notes was 90% of the face  amount of the notes  resulting  in a discount  of
$600,000.  The notes are  secured by a second  lien on all assets of the Company
and rank junior to the senior financing provided by the bank. In connection with
this  financing,  the company  issued to the purchasers of the notes warrants to
purchase  up to 3.75% of the  fully  diluted  common  stock of the  Company  and
granted to the  purchasers an option to purchase from the Company  certain Trust
Preferred  Securities of the Company's  subsidiary,  U.S. Home & Garden Trust I,
that are owned by the Company,  which  resulted in a discount of  $402,000.  The
Company is required to pay certain fees and is subject to certain restrictions.

Critical Accounting Policies

The preparation of financial statements requires the adoption and implementation
of  accounting  policies  and the use of  assumptions  and  estimates  in  their
presentation. The accounting policies and uncertainties, judgments and estimates
make it  likely  that  materially  different  amounts  would be  reported  under
different conditions and different assumptions.

The Company has included  below a  discussion  of the more  critical  accounting
policies that are affected by the  significant  judgments and estimates  used in
the preparation of the financial statements,  how such policies are applied, and
how results  differing  from the  estimates  and  assumptions  would  affect the
amounts presented in the financial  statements.  Other accounting  policies also
have a  significant  effect  on the  financial  statements,  and  some of  these
policies also require the use of estimates and  assumptions  as discussed in the
Summary  of  Accounting  Policies  in  the  Company's   Consolidated   Financial
Statements at June 30, 2001.

Allowance  for  Doubtful  Accounts  Receivable  and Sales  Returns:  The Company
maintains an allowance for doubtful  accounts  receivable,  which represents the
potential  estimated  losses  resulting  from the inability of customers to


                                                                              18
<PAGE>

make  required  payments for amounts owed.  The allowance is estimated  based on
historical experience of write-offs, the level of past due amounts,  information
known about specific customers with respect to their ability to make payments at
the balance sheet date. If the  financial  condition of the Company's  customers
were to change,  resulting in an impairment or  improvement  in their ability to
make  payments,  additional  allowances  may be  required or  allowances  may be
reduced.

The Company also  maintains an allowance  for sales  returns.  The  allowance is
estimated  based on historical  experience of sales returns from  customers with
agreements that allow the return of product. If actual market conditions for the
sale of the products by the customers are less favorable than those anticipated,
additional allowances may be required.

Inventories:  The Company records inventory reserves for estimated  obsolescence
of inventory equal to the difference between the cost of inventory owned and the
estimated market value. Market value is based upon the age of specific inventory
on hand and  assumptions  about future demand and market  conditions.  If actual
market  conditions  for the sale of the inventory are less  favorable than those
anticipated by management, additional reserves may be required.

Intangible Assets: The Company has consummated eleven acquisitions accounted for
using the purchase  method.  The excess of cost over net assets  acquired  which
relates to the Company's acquisitions has been recorded as goodwill.  Intangible
assets are tested for  impairment by comparing the carrying  value of the assets
of the individual  reporting units of the Company to their fair value.  The fair
value of the assets could vary significantly over time and different assumptions
and estimates will result in different valuations.

Deferred  Income  Taxes:  The Company  records  deferred  income  taxes based on
enacted income tax rates in effect on the dates  temporary  differences  between
the financial reporting and tax bases of assets and liabilities  reverse. To the
extent  that  available  evidence  about  the  future  raises  doubt  about  the
realization of a deferred tax asset, a valuation  allowance is established.  The
Company  has  recorded  a  valuation  allowance  due to the  uncertainty  of the
Company's  ability to generate  sufficient  future taxable income to realize the
gross  deferred tax assets.  If the Company is able to generate  future  taxable
income, the valuation allowance may be adjusted.

New Accounting Pronouncements

The Emerging Issues Task Force (EITF) has issued EITF Issue 00-25, Vendor Income
Statement  Characterization  of Consideration  Paid to a Reseller of the Vendors
Products,  and EITF Issue 01-09,  Accounting for Consideration Given by a Vendor
to  a  Customer,   which  provide  guidance  related  to  the  income  statement
classification of such consideration. This guidance is effective for the Company
for the quarter ended March 31, 2002.  The adoption of EITF 00-25 and EITF 01-09
did not have an affect on the Company's financial statements.

In August 2001, the Financial Accounting Standards Board finalized SFAS No. 144,
Accounting  for the  Impairment or Disposal of Long-Lived  Assets.  SFAS No. 144
addresses  accounting and reporting for the impairment or disposal of long-lived
assets,  including  the  disposal  of a segment  of  business.  SFAS No.  144 is
effective  for fiscal years  beginning  after  December  15,  2001,  and interim
periods within those fiscal years. We are currently reviewing the impact of SFAS
No. 144.

In June 2001, the FASB finalized SFAS No. 141, Business  Combinations,  and SFAS
No. 142, Goodwill and Other Intangible Assets.  SFAS No. 141 requires the use of
the   purchase   method   of   accounting   and   prohibits   the   use  of  the
pooling-of-interest  method of accounting  for business  combinations  initiated
after June 30,  2001.  SFAS No. 141 also  requires  that the  Company  recognize
acquired intangible assets apart from goodwill if the acquired intangible assets
meet  certain  criteria.  SFAS No.  141  applies  to all  business  combinations
initiated after June 30, 2001 and for purchase business  combinations  completed
on or after July 1, 2001. It also requires,  upon adoption of SFAS No. 142, that
the Company  reclassify the carrying  amounts of intangible  assets and goodwill
based on the criteria of SFAS No. 141.


                                                                              19
<PAGE>

SFAS No. 142 requires,  among other things,  that  companies no longer  amortize
goodwill,  but instead  test  goodwill  for  impairment  at least  annually.  In
addition,  SFAS No. 142 requires that the Company  identify  reporting units for
the purpose of assessing potential future impairments of goodwill,  reassess the
useful  lives  of  other  existing  recognized   intangible  assets,  and  cease
amortization of intangible  assets with an indefinite useful life. An intangible
asset  with an  indefinite  useful  life  should be  tested  for  impairment  in
accordance  with the  guidance in SFAS NO.  142.  SFAS No. 142 is required to be
applied in fiscal years  beginning  after  December 15, 2001 to all goodwill and
other intangible assets recognized at that date, regardless of when those assets
were  initially  recognized.  SFAS No. 142  requires  the  Company to complete a
transitional goodwill impairment test six months from the date of adoption.  The
Company is also required to reassess the useful lives of other intangible assets
within the first interim quarter after adoption of SFAS No. 142. The Company has
elected to adopt SFAS No. 141 and SFAS No. 142, effective July 1, 2001. See Note
7 to the Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

As a result of its variable rate  revolving  credit line, the Company is exposed
to the risk of rising interest rates.  The following table provides  information
on the Company's  fixed maturity debt as of March 31, 2002 that are sensitive to
changes in interest rates.

The Revolving Credit Facility had an                               $15.9 million
interest rate of 5.25% for the period ended
March 31, 2002.


                                                                              20
<PAGE>

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

In July 2000,  the  Company's  Weed Wizard  Acquisition  Corp.  ("Weed  Wizard")
commenced an action in the U.S.  District Court,  Northern  District of Georgia,
against A.A.B.B.,  Inc. (formerly known as Weed Wizard, Inc.) and certain of its
stockholders  and  officers.  In  this  action  the  Company  alleged  that  the
defendants made certain misrepresentations and omitted to disclose certain facts
regarding,  among other  things,  alleged  defects in certain of the Weed Wizard
products  in  connection   with  our  purchase   from   defendants  in  1998  of
substantially  all of the assets of Weed Wizard,  Inc. We are seeking to rescind
the  transaction,  or in the  alternative,  to  recover  rescissionary  monetary
damages,  and to recover  compensatory  damages.  In  addition,  we are  seeking
punitive damages.

In October 2000,  A.A.B.B.,  Inc. asserted a counterclaim for breach of contract
against  Weed  Wizard  alleging  that  it  is  owed  $720,267,   plus  interest,
representing an adjustment to the purchase price  allegedly  required to be made
pursuant to the agreement in which Weed Wizard acquired certain A.A.B.B., Inc.'s
assets.  A.A.B.B.,  Inc. is also seeking to recover attorney's fees. We deny any
liability and intend to vigorously defend this counterclaim.

In fiscal  2001,  we were  notified  by the staff of the U.S.  Consumer  Product
Safety Commission  ("CPSC") that the staff is considering  recommending that the
CPSC commence an action  against Weed Wizard to obtain a monetary fine from Weed
Wizard for the alleged  failure of Weed  Wizard to timely  disclose to the CPSC,
pursuant to the  Consumer  Products  Safety Act,  certain  required  information
concerning Weed Wizard product previously distributed by us that was the subject
of a voluntary  recall during fiscal 2000. We believe that the maximum amount of
any claim that may be brought  by the CPSC will not  exceed  approximately  $1.6
million.  We intend to defend any claim  against  Weed  Wizard or us that may be
brought by the CPSC.

Item 6. Exhibits and Reports on Form 8-K

     (a) None

     (b) No reports on Form 8-K were filed  during the  quarter  ended March 31,
         2002.

                                   SIGNATURES

Pursuant  to the  requirement  of the  Securities  Exchange  Act  of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

May 14, 2002

U.S. Home & Garden Inc.
                                                                    (Registrant)




                                            By:   /s/ Robert Kassel
                                            ------------------------------------
                                            President, Chief Executive Officer

                                            By:   /s/ Richard Kurz
                                            ------------------------------------
                                            Chief Financial Officer


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